LONDON — Baugur Group, the Icelandic retail investor that until recently owned swathes of the U.K. high street, is to file for bankruptcy in Iceland, the company said Wednesday. Earlier in the day, a Reykjavik court rejected the investment firm’s request to extend its moratorium process, which is equivalent to Chapter 11 bankruptcy protection.

This story first appeared in the March 12, 2009 issue of WWD. Subscribe Today.

“The court’s ruling today is a disappointment to everyone at Baugur,” said Kristin Johannesdottir, chairman of Baugur Group. “We believe that the company fulfills all the conditions for the extension and that the restructuring plan is viable. However, following the ruling, we have no choice but to file for bankruptcy.”

Baugur had originally been granted the moratorium process last month, after its talks with Icelandic banks to restructure its estimated 1 billion pounds, or $1.38 billion, worth of debt broke down. The company has been struggling under the weight of its debts since the collapse of the Icelandic banking system last year.

According to industry sources, following the bankruptcy filing, the Icelandic court will likely appoint a liquidator to oversee the sale of Baugur’s assets. They include minority stakes in the U.K. retailers Whistles, All Saints and Jane Norman, along with minority stakes in Matthew Williamson and an interest in Saks. Sources said because Baugur holds only minority stakes in those retailers, the move is unlikely to have any impact on their businesses beyond a change in their shareholding structure.

The once-acquisitive group’s business has shrunk rapidly. BG Holding ehf, a subsidiary of Baugur, was put into administration in the U.K. last month, and its stakes in House of Fraser, jewelry group Aurum, toy store Hamleys and the Iceland Foods Group Ltd. are now under the control of the Icelandic bank Landsbanki. Mosaic Fashions, in which Baugur held a 49 percent stake, went into pre-pack administration last week, and the majority of its brands were bought back by its chief executive Derek Lovelock and the Icelandic bank Kaupthing, who then formed a new company, Aurora Fashions.